Confluent downgraded on cloud growth slowdown, execution concerns

Investing.com -- Confluent shares were hit with downgrade by both Stifel and TD Cowen to Hold amid mounting headwinds in cloud growth and slower customer activity.

Stifel cut its rating from Buy and lowered its price target to $21 from $27, pointing to reduced cloud usage, fewer new workloads, and a key AI customer shifting to a self-managed platform.

The brokerage warned that net revenue retention, already down 300 basis points sequentially to 114%, could fall further.

It also flagged margin pressure from a planned $200 million investment in the partner channel over the next three years.

TD Cowen echoed the cautious tone, reducing its target to $24 from $32 after what it called a “mixed” second quarter.

The firm noted Confluent’s subscription revenue beat by about 1%, well below the three-quarter average of ~3%. Cloud growth showed sharper deceleration, and management acknowledged ongoing softness in customer spending.

TD Cowen expects structural challenges to weigh on the business and sees valuations staying under pressure.

Confluent shares were down more than 25% post-earnings.

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